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INTRODUCTION TO INDUSTRY

An industry is the manufacturing of a good or service within a category. Although

industry is a broad term for any kind of economic production, in economics andurban planning, industry is a synonym for the secondary sector , which is a type of

economic activity involved in the manufacturing of raw materials into goods and

products.

“Industry” means any systematic activity carried on by co-operation between an

employer and his workmen for the production, supply or distribution of goods or

services with a view to satisfy human wants or wishes (not being wants or wishes

which are merely spiritual or religious in nature), whether or not any capital has

been invested for the purpose of carrying on such activity; or such activity is

carried on with a motive to make any gain or profit.

SCOPE OF THE STUDY

There are four key industrial economic sectors: the primary sector,

the secondary sector, the tertiary sector, the quaternary sector, and the quinary

sector. The economy is also broadly separated into public sector and private

sector , with industry generally categorized as private. Industries are also any

business or manufacturing.

Primary sector: These industries are involved in the extraction or production of

raw materials such as mining, farming, fishing, forestry, coal mining, oil drilling,

gold mining etc.

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Secondary sector: The secondary sector of the economy includes those economic

sectors that create a finished, usable product. These industries are involved in the

processing of raw materials such as refining, construction, and manufacturing. This

sector generally takes the output of the primary sector and manufactures finished

goods for export, or sale to domestic consumers.

Tertiary sector: These are the service industries, e.g. Transport, dentists, doctors,

and so on. The capital required for a manufacturing business (secondary sector) is

usually prohibitively large.

Quaternary sector: A relatively new type of knowledge industry focusing on

technological research, design and development such as computer programming,

and biochemistry. It focuses on the latest technology. Examples of ‛Quaternary

Industries‛ are designing new computers/writing computer software, Researching

new medicines and medical equipment.

Quinary sector: The sector comprises of health, education, culture, research,

police, fire service, and other government industries not intended to make a profit.

The quinary sector also includes domestic activities such as those performed by

stay-at-home parents or homemakers. These activities are not measured by

monetary amounts but make a considerable contribution to the economy.

INDUSTRY LIFECYCLE

The stages of evolution through which an industry progresses as it moves from

conception to stabilization and stagnation represent an industry lifecycle. An

industry has a beginning, with technological innovation; a period of rapid growth;

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maturity and consolidation; and finally decline and possibly death. The stages of

industry lifecycle include fragmentation, shake-out, maturity and decline.

Developmental Stage: The first stage of the industry life cycle is developmental or

formative stage. This is the stage when the new industry develops the business. At

this stage, the new industry normally arises when an entrepreneur works out how

to bring the new products or services into the

market. The growth prospects are usually high.

Competition is likely to enhance during the

development of this stage as other entrepreneurs

become acquainted with the market potential. High

risks can be seen in this phase given that there is

insecurity as to whether or not consumers will

generally acknowledge the product, and which firms will continue to exist.

Shake-out or growth stage: Shake-out is the second stage at which a new industry

emerges. Consumer recognition extends the market as the leaders develop the

product more. The risk in this stage reduces because of increased consumer

acceptance and customer loyalty starts to come about. Competitors start to realize

business opportunities in the emerging industry.

Maturity: Maturity is the third stage in the industry lifecycle. This is by and large

the most extended stage in the life cycle and can last for a good number of years.

The competition in the industry is rather aggressive because there are manycompetitors and product substitutes. The growth rate slows down and becomes

stable at a level that is sustainable over a long period of time, as a result of

competition and shrinking profit margins. Some companies may shift some of the

production overseas in order to gain competitive advantage.

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Decline: Decline is the final stage of the industry lifecycle during which a war of

slow destruction between businesses may develop and those with heavy

bureaucracies may fail. In addition, the demand in the market may be fully

satisfied or suppliers may be running out. Some companies may leave the industry

if there is no demand for the products or services they provide, or they may

develop new products or services that meet the demand in the market. In such

cases, this will create a new industry.

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AUTOMOBILE INDUSTRY

The automobile industry in India is the ninth largest in the world with an annual

production of over 2.3 million units in 2008. In 2009, India emerged as Asia's

fourth largest exporter of automobiles, behind Japan, South Korea and Thailand.

Following economic liberalization in India in 1991, the Indian automotive industry

has demonstrated sustained growth as a result of increased competitiveness and

relaxed restrictions. Several Indian automobile manufacturers such as Tata Motors,

Maruti Suzuki and Mahindra and Mahindra, expanded their domestic and

international operations.

Since the first car rolled out on the streets of Mumbai (then Bombay) in 1898, the

Automobile Industry of India has come a long way. During its early stages the auto

industry was overlooked by the then Government and the policies were also not

favorable. The liberalization policy and various tax relief by the Govt. of India in

recent years has made remarkable impacts on Indian Automobile Industry. Indian

auto industry, which is currently growing at the pace of around 18 % per annum,

has become a hot destination for global auto players like Volvo, General Motors

and Ford.

A well developed transportation system plays a key role in the development of an

economy, and India is no exception to it. With the growth of transportation system

the Automotive Industry of India is also growing at rapid speed, occupying an

important place on the canvas of Indian economy. The face of the Indian

automobile market has changed tremendously since the turn of the millennium and

will change even further since Nano.

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Today Indian automotive industry is fully capable of producing various kinds of

vehicles and can be divided into 03 broad categories: Cars, two-wheelers and

heavy vehicles.

Segment Know-how

Among the two-wheeler segment, motorcycles have major share in the market.

Hero Honda contributes 50% motorcycles to the market. In it Honda holds 46%

share in scooter and TVS makes 82% of the mopeds in the country.

40% of the three-wheelers are used as goods transport purpose. Piaggio holds 40%

of the market share. Among the passenger transport, Bajaj is the leader by making

68% of the three-wheelers.

Cars dominate the passenger vehicle market by 79%. Maruti Suzuki has 52% share

in passenger cars and is a complete monopoly in multi purpose vehicles. In utility

vehicles Mahindra holds 42% share.

In commercial vehicle, Tata Motors dominates the market with more than 60%

share. Tata Motors is also the world's fifth largest medium & heavy commercial

vehicle manufacturer.

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INDIAN AUTOMOBILE HISTORY

During the 1920s, cars exhibited design refinements such as balloon tires,

pressed-steel wheels, and four-wheel brakes.

An embryonic automotive industry emerged in India in the 1940s. Following the

independence, in 1953, the Government of India and the private sector launched

efforts to create an automotive component manufacturing industry to supply to the

automobile industry. However, the growth was relatively slow in the 1950s and

1960s due to nationalisation and the license raj which hampered the Indian private

sector. After 1970, the automotive industry started to grow, but the growth was

mainly driven by tractors, commercial vehicles and scooters. Cars were still a

major luxury. Japanese manufacturers entered the Indian market ultimately leading

to the establishment of Maruti Udyog. A number of foreign firms initiated joint

ventures with Indian companies.

In the 1980s, a number of Japanese manufacturers launched joint-ventures for

building motorcycles and light commercial-vehicles. It was at this time that the

Indian government chose Suzuki for its joint-venture to manufacture small cars.

Following the economic liberalisation in 1991 and the gradual weakening of the

license raj, a number of Indian and multi-national car companies launched

operations. Since then, automotive component and

automobile manufacturing growth has accelerated to meet

domestic and export demands

The automobile industry has changed the way people live and

work. The earliest of modern cars was manufactured in the

year 1895. Shortly the first appearance of the car followed in

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India. As the century turned, three cars were imported in Mumbai (India). The

dawn of automobile actually goes back to 4000 years when the first wheel was

used for transportation in India. In the beginning of 15th century Portuguese

arrived in China and the interaction of the two cultures led to a variety of new

technologies, including the creation of a wheel that turned under its own power. By

1600s small steam-powered engine models was developed.

The actual horseless carriage was introduced in the year

1893. One of the highest-rated early luxury automobiles

was the 1909 Rolls-Royce Silver Ghost that featured a

quiet 6-cylinder engine, leather interior, folding

windscreens and hood, and an aluminum body. It was

usually driven by chauffeurs and emphasis was on

comfort and style rather than speed.

The year 1957 brought powerful high-performance cars

such as Mercedes-Benz 300SL. It was built on compact

and stylized lines, and was capable of 230 kmh (144

mph). This was the Indian automobile history, and today

modern cars are generally light, aerodynamically shaped,

and compact.

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GROWTH

In India there are 100 people per vehicle, while this figure is 82 in China. It is

expected that Indian automobile industry will achieve mass motorization status

by 2014. The Indian automobile industry is often described as the sunrise

Industry.

The Automobile Industry is one of the fastest growing sectors in India. The

increase in the demand for cars, and other vehicles, powered by the increase in the

income is the primary growth driver of the automobile industry in India. The

introduction of tailor made finance schemes, easy repayment schemes has also

helped the growth of the automobile sector. India, in auto sector, is turning to be a

sourcing base for the global auto majors. The passenger car and the motorcycle

segment are set to grow by 8-9 per cent in coming couple of years. The industry is

striving to maintain the growth momentum picked up in 2002-03.

India has become one of the international players in the automobile

market

In the year 2006-07, the Indian Automobile Industry produced 2.06

million four wheelers and 9 million two and three wheelers

The four wheelers include passenger cars, multi-utility vehicles, sports

utility vehicles, light, medium and heavy commercial vehicles, etc

The three wheelers include mopeds, motor-cycles, scooters, and three

wheelers

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India ranks 2nd in the global two-wheeler market

India is the 4th biggest commercial vehicle market in the world

India ranks 11th in the international passenger car market

India ranks 5th pertaining to the number of bus and truck sold in the

world

It is expected that the Automobile Industry in India would be the 7th

largest automobile market within the year 2016

Sales incentives, introduction of new models as well as variants coupled with easy

availability of low cost finance with comfortable repayment options continued to

drive demand and sales of automobiles. As the players continue to introduce new

models and variants, the competition may intensify further. It is not only meeting

the growing domestic demands, but also gradually increasing its penetration in the

international markets. It has been continuously restructuring itself and absorbing

newer technologies in order to align itself to the global developments and realize

its potentialities. Among the car companies that are investing in India are US

automakers General Motors and Ford, Germany's BMW and DaimlerChrysler AG,

France's Renault, Japan's Suzuki, Toyota and Honda, and South Korea's Hyundai.

Automobile industry in India also received a boost from stringent government auto

emission regulations over the past few years. This ensured that vehicles produced

in India conformed to the standards of the developed world.

With the growing automotive market, customers are always looking for newer

designs. Automobile designing has, therefore, become as important as fuel

efficiency or the safety and ergonomics of a vehicle. The setting up of indigenous

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auto designing capabilities through a national automobile design institute is,

therefore, essential for the growth of Indian auto Industry

There is also a boom in auto ancillary companies. India is an attractive outsourcing

destination for global auto companies because of its strong engineering skills and

low costs. Sourcing parts from India is 10-20% cheaper for US auto makers and

about 50% cheaper for their European counterparts. The auto component sector has

also posted significant growth of 20 per cent in 2003-04, to achieve a sales

turnover of Rs.30, 640 crore. There is a potential for higher growth due to

outsourcing activities by global automobiles giants. Today, this sector has emerged

as another sunrise sector.

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CONTRIBUTION

In India, automotive is one of the largest industries showing impressive growth

over the years and has been significantly making increasing contribution to overallindustrial development in the country. It plays a pivotal role in country's rapid

economic and industrial development. It caters to the requirement of equipment for

basic industries like steel, non-ferrous metals, fertilizers, refineries,

petrochemicals, shipping, textiles, plastics, glass, rubber, capital equipments,

logistics, paper, cement, sugar, etc. It facilitates the improvement in various

infrastructure facilities like power, rail and road transport.

On the canvas of the Indian economy, auto industry occupies a prominent place.

The automotive industry has a strong multiplier effect and is capable of being the

driver of economic growth. A sound transportation system plays a pivotal role in

the country's rapid economic and industrial development. The well-developed

Indian automotive industry ably fulfils this catalytic role by producing a wide

variety of vehicles: passenger cars, light, medium and heavy commercial vehicles,

multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers,

tractors etc.

Indian automobile industry; manufacturing cars, buses, three wheelers, two

wheelers, commercial vehicles, heavy vehicles, provides employment to a large

number of workforce. The abolition of license raj in 1991 opened the doors for

international automobile manufacturers. A number of leading global automotive

companies entered into joint ventures with domestic manufacturers of India and

thus started the large-scale production of automobiles in India. The automobile

sector is one of the core industries of the Indian economy, whose prospect is

reflective of the economic resilience of the country.

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The automotive industry comprising of the automobile and the auto component

sectors has made rapid strides since delicensing and opening up of the sector to

FDI in 1991. The Auto Component industry is today considered as the sunrise

industry with huge growth prospects. This industry is also expected to drive the

growth of the engineering sector in view of its strong downstream and upstream

linkages with many other segments of the engineering sector like raw materials,

capital goods, intermediate products etc. Government has also liberalized the

norms for import of technology and that appears to have benefited the automobile

sector. The industry had an investment of about Rs. 50,000 crore in 2002-03

which has gone upto Rs. 80,000 crore by the year 2007. The contribution of the

automotive industry to GDP has risen from 2.77% in 1992-93 to 5% in 2006-07.

The industry is also making a contribution of 17% to the kitty of indirect taxes of

the Government.

The Indian automotive industry has already attained a turnover of Rs. 1, 65,000

crore (34 billion USD) and has provided direct and indirect employment to 1.31

crore people in the country. Endowed with several advantages like low cost and

high skill manpower; globally competitive auto-ancillary industry; established

testing and R & D centers; production of steel at lowest cost; etc., the industry

provide immense investment opportunities. This has instilled confidence in auto

manufacturers to face international competition as well as improve quality

standards of vehicles with safety norms in the wake of rapidly increasing traffic.

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PROFILE OF MARUTI SUZUKI

Maruti Suzuki India Limited (MSIL, formerly Maruti Udyog Limited), a

subsidiary of Suzuki Motor Corporation of Japan, is India's largest passenger car

company, accounting for over 50 per cent of the domestic car market. More than

half the numbers of cars sold in India wear a Maruti Suzuki badge. The company

offers full range of cars- from entry level Maruti 800 & Alto to stylish hatchback

Ritz, A star, Swift, Wagon R, Estillo and sedans DZire, SX4 and Sports Utility

vehicle Grand Vitara. Since inception, it has produced and sold over 7.5 million

vehicles in India and exported over 500,000 units to Europe and other countries.

The turnover for the fiscal 2008-09 stood at Rs. 203,583 Million & Profit after Tax

at Rs. 12,187 Million.

The company was born as a government company, with Suzuki as a minor partner,

to make a people's car for middle class India. Over the years, the product range has

widened, ownership has changed hands and the customer has evolved. What

remains unchanged, then and now, is its mission to motorize India.

The parent company, Suzuki Motor Corporation, has been a global leader in mini

and compact cars for three decades. Suzuki's technical superiority lies in its ability

to pack power and performance into a compact, lightweight engine that is clean

and fuel efficient.

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The company takes great pride in sharing that customers have rated Maruti Suzuki

first once again in Customer Satisfaction Survey conducted by independent body,

J.D.Power Asia Pacific. It is 10th time in a row.

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FINANCIAL STATEMENTS

Balance Sheet

Balance Sheet of Maruti

Suzuki India------------------- in Rs. Cr. -------------------

Mar '07 Mar '08 Mar '09Sources Of Funds 12 mths 12 mths 12 mthsTotal Share Capital 144.50 144.50 144.50Equity Share Capital 144.50 144.50 144.50Share Application Money 0.00 0.00 0.00Preference Share Capital 0.00 0.00 0.00Reserves 6,709.40 8,270.90 9,200.40

Revaluation Reserves 0.00 0.00 0.00Networth 6,853.90 8,415.40 9,344.90Secured Loans 63.50 0.10 0.10Unsecured Loans 567.30 900.10 698.80Total Debt 630.80 900.20 698.90Total Liabilities 7,484.70 9,315.60 10,043.80

Mar '07 Mar '08 Mar '09Application Of Funds 12 mths 12 mths 12 mthsGross Block 6,146.80 7,285.30 8,720.60Less: Accum. Depreciation 3,487.10 3,988.80 4,649.80Net Block 2,659.70 3,296.50 4,070.80

Capital Work in Progress 238.90 736.30 861.30Investments 3,409.20 5,180.70 3,173.30Inventories 713.20 1,038.00 902.30Sundry Debtors 747.40 655.50 918.90Cash and Bank Balance 114.80 324.00 239.00Total Current Assets 1,575.40 2,017.50 2,060.20Loans and Advances 1,072.60 1,173.00 1,809.80Fixed Deposits 1,308.00 0.00 1,700.00Total CA, Loans & Advances 3,956.00 3,190.50 5,570.00Deferred Credit 0.00 0.00 0.00Current Liabilities 2,288.60 2,718.90 3,250.90Provisions 490.50 369.50 380.70Total CL & Provisions 2,779.10 3,088.40 3,631.60Net Current Assets 1,176.90 102.10 1,938.40Miscellaneous Expenses 0.00 0.00 0.00Total Assets 7,484.70 9,315.60 10,043.80Contingent Liabilities 2,094.60 2,734.20 1,901.70Book Value (Rs) 237.23 291.28 323.45

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Profit and loss account (income statement)

Profit & Loss account of Maruti

Suzuki India

------------------- in Rs. Cr.

-------------------Mar '07 Mar '08 Mar '09

IncomeSales Turnover 17,358.40 21,200.40 23,381.50Excise Duty 2,552.00 3,133.60 2,652.10Net Sales 14,806.40 18,066.80 20,729.40Other Income 338.10 494.00 491.70Stock Adjustments -200.70 336.30 -356.60Total Income 14,943.80 18,897.10 20,864.50

Raw Materials 10,863.00 13,958.30 15,983.20Power & Fuel Cost 97.40 147.30 193.60Employee Cost 288.40 356.20 471.10Other Manufacturing Expenses 392.40 523.30 716.10

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Selling and Admin Expenses 483.26 521.48 751.06Miscellaneous Expenses 239.44 287.62 303.44Preoperative Exp Capitalized -14.30 -19.80 -22.30Total Expenses 12,349.60 15,774.40 18,396.20

Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mthsOperating Profit 2,256.10 2,628.70 1,976.60PBDIT 2,594.20 3,122.70 2,468.30Interest 37.60 59.60 51.00PBDT 2,556.60 3,063.10 2,417.30Depreciation 271.40 568.20 706.50Other Written Off 0.00 0.00 0.00Profit Before Tax 2,285.20 2,494.90 1,710.80Extra-ordinary items 33.40 76.60 37.90PBT (Post Extra-ord Items) 2,318.60 2,571.50 1,748.70Tax 705.30 763.30 457.10

Reported Net Profit 1,562.00 1,730.80 1,218.70Total Value Addition 1,486.60 1,816.10 2,413.00Preference Dividend 0.00 0.00 0.00Equity Dividend 130.00 144.50 101.10Corporate Dividend Tax 21.90 24.80 17.20Per share data (annualized)Shares in issue (lakhs) 2,889.10 2,889.10 2,889.10Earning Per Share (Rs) 54.07 59.91 42.18

Equity Dividend (%) 90.00 100.00 70.00

Book Value (Rs) 237.23 291.28 323.45

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PROFILE OF TATA MOTORS

Tata Motors Limited is India's largest automobile company, with consolidated

revenues of Rs.70, 938.85 crores (USD 14 billion) in 2008-09. It is the leader in

commercial vehicles in each segment, and among the top three in passenger

vehicles with winning products in the compact, midsize car and utility vehicle

segments. The company is the world's fourth largest truck manufacturer, and the

world's second largest bus manufacturer.

The company's 23,000 employees are guided by the vision to be "best in the

manner in which we operate best in the products we deliver and best in our value

system and ethics."

Established in 1945, Tata Motors' presence indeed cuts across the length and

breadth of India. The company's manufacturing base in India is spread across

Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh),

Pantnagar (Uttarakhand) and Dharwad (Karnataka).

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Tata Motors, the first company from India's engineering sector to be listed in the

New York Stock Exchange (September 2004), has also emerged as an

international automobile company. Through subsidiaries and associate

companies, Tata Motors has operations in the UK, South Korea, Thailand and

Spain. Among them is Jaguar Land Rover, a business comprising the two iconic

British brands that was acquired in 2008.

It was Tata Motors, which developed the first indigenously developed Light

Commercial Vehicle, India’s first Sports Utility Vehicle and, in 1998, the Tata

Indica, India's first fully indigenous passenger car. Within two years of launch,

Tata Indica became India’s largest selling car in its segment. In 2005, Tata

Motors created a new segment by launching the Tata Ace, India's first

indigenously developed mini-truck.

In January 2008, Tata Motors unveiled its People's Car, the Tata Nano, which

India and the world have been looking forward to. The Tata Nano has been

subsequently launched, as planned, in India in March 2009 and has won the

prestigious Indian Car of the Year (ICOTY) award.

In May 2009, Tata Motors introduced ushered in a new era in the Indian

automobile industry, in keeping with its pioneering tradition, by unveiling its new

range of world standard trucks called Prima. In June 2009, the exciting new range

of premium luxury vehicles from Jaguar and Land Rover were introduced for the

Indian market.

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FINANCIAL STATEMENTS

Balance Sheet

Balance Sheet of Tata

Motors------------------- in Rs. Cr. -------------------

Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths

Sources Of Funds

Total Share Capital 385.41 385.54 514.05

Equity Share Capital 385.41 385.54 514.05

Share Application Money 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00

Reserves 6,458.39 7,428.45 11,855.15

Revaluation Reserves 25.95 25.51 25.07

Networth 6,869.75 7,839.50 12,394.27

Secured Loans 2,022.04 2,461.99 5,251.65

Unsecured Loans 1,987.10 3,818.53 7,913.91

Total Debt 4,009.14 6,280.52 13,165.56

Total Liabilities 10,878.89 14,120.02 25,559.83

Mar '07 Mar '08 Mar '09


Application Of Funds

Gross Block 8,775.80 10,830.83 13,905.17

Less: Accum.

Depreciation4,894.54 5,443.52 6,259.90

Net Block 3,881.26 5,387.31 7,645.27

Capital Work in Progress 2,513.32 5,064.96 6,954.04

Investments 2,477.00 4,910.27 12,968.13

Inventories 2,500.95 2,421.83 2,229.81

21



Sundry Debtors 782.18 1,130.73 1,555.20

Cash and Bank Balance 535.78 750.14 638.17

Total Current Assets 3,818.91 4,302.70 4,423.18

Loans and Advances 6,208.53 4,831.36 5,909.75

Fixed Deposits 290.98 1,647.17 503.65Total CA, Loans &

Advances10,318.42 10,781.23 10,836.58

Deferred Credit 0.00 0.00 0.00

Current Liabilities 6,956.88 10,040.37 10,968.95

Provisions 1,364.32 1,989.43 1,877.26

Total CL & Provisions 8,321.20 12,029.80 12,846.21

Net Current Assets 1,997.22 -1,248.57 -2,009.63

Miscellaneous Expenses 10.09 6.05 2.02

Total Assets 10,878.89 14,120.02 25,559.83Contingent Liabilities 5,196.07 5,590.83 5,433.07

Book Value (Rs) 177.59 202.70 240.64

PROFIT AND LOSS ACCOUNT (INCOME STATEMENT)

22



23

PARTICULARS MAR 07 MAR 08 MAR 09

IncomeSales Turnover 31,089.69 33,123.54 28,538.20Excise Duty 4,425.44 4,355.63 2,877.53

Net Sales 26,664.25 28,767.91 25,660.67

Other Income 1,114.38 734.17 921.29Stock Adjustments 349.68 -40.48 -238.04

Total Income Expenditure 28,128.31 29,461.60 26,343.92

Raw Materials 19,879.56 20,891.33 18,801.37

Power & Fuel Cost 327.41 325.19 304.94

Employee Cost 1,367.83 1,544.57 1,551.39

Other Manufacturing Expenses 872.95 904.95 866.65Selling and Admin Expenses 1,505.23 2,197.49 1,652.31

Miscellaneous Expenses 1,051.49 964.78 1,438.89

Preoperative Exp Capitalized -577.05 -1,131.40 -916.02Total Expenses 24,427.42 25,696.91 23,699.53

Mar '07 Mar '08 Mar '09


Operating Profit 2,586.51 3,030.52 1,723.10

PBDIT 3,700.89 3,764.69 2,644.39

Interest 455.75 471.56 704.92

PBDT 3,245.14 3,293.13 1,939.47

Depreciation 586.29 652.31 874.54Other Written Off 85.02 64.35 51.17

Profit Before Tax 2,573.83 2,576.47 1,013.76Extra-ordinary items -0.07 0.00 15.29

PBT (Post Extra-ord Items) 2,573.76 2,576.47 1,029.05

Tax 660.37 547.55 12.50

Reported Net Profit 1,913.46 2,028.92 1,001.26

Total Value Addition 4,547.86 4,805.58 4,898.16

Preference Dividend 0.00 0.00 0.00Equity Dividend 578.07 578.43 311.61

Corporate Dividend Tax 98.25 81.25 34.09

Per share data (annualized)Shares in issue (lakhs) 3,853.74 3,855.04 5,140.08

Earning Per Share (Rs) 49.65 52.63 19.48

Equity Dividend (%) 150.00 150.00 125.00

Book Value (Rs) 177.59 202.70 240.64



COMPARISION OF FINANCIAL ACCOUNT WITH THE HELP

OF RATIOS:

LIQUIDITY RATIOS:

24



It measures the ability of the firm to meet its short-term obligations that is capacity

of the firm to pay its current liabilities as and when they fall due. Thus these ratios

reflect the short-term financial solvency of a firm.

1. Current ratio

Current ratio is the relationship between current assets and current liabilities. It is a

measure of general liquidity i.e. analysis of short-term financial position. A current

ratio of 2:1 is the standard ratio of liquidity for a firm.

The higher the current ratio the greater is the margin of safety. The larger the

amount of current assets in relation to current liabilities, the more is the firm’s

ability to meet its current obligations.

Current Ratio = Current Asset

Current Liabilities

Maruti

Suzuki

Mar

'07

Mar

'08

Mar

'09

TATA

Motors

Mar

'07 Mar '08 Mar '09

Total

Current

1575.

4

2017.

5

2060.

2

Total

Current

3818.9

1

4302.7 4423.18

25



Assets Assets

Current

Liabilities

2288.

6

2718.

9

3250.

9

Current

Liabilitie

s

6956.8

8

10040.3

7 10968.21Current

Ratio 0.69 0.74 0.63

Current

Ratio 0.55 0.430.40

Interpretation:

The short-term liquidity position of the Maruti and Tata is not sound as the ratio

in all the years is below the standard of 2:1. The current ratio of maruti Suzuki

is higher than tata motors.

2. Quick Ratio

26



Quick ratio is the relationship between quick assets and current liabilities. It

measures the firm’s capacity to pay off current obligations immediately and is a

more rigorous test of liquidity.

A high quick ratio indicates that the firm is liquid and has the ability to meet its

current obligations in time and on the other hand a low quick ratio represents that

the firm’s liquidity position is not good.

A standard of 1:1 is considered satisfactory.

Quick Ratio = Quick Assets

Current liabilities

(Quick assets = current assets – inventory)

Maruti Suzuki

Mar

'07 Mar '08

Mar

'09 TATA Motors Mar '07 Mar '08 Mar '09

Total Current

Assets

1575.

4 2017.5

2060.

2

Total Current

Assets 3818.91 4302.7 4423.18

Inventories 713.2

1,038.0

0 902.3 Inventories

2,500.9

5 2,421.83 2,229.81

Current

Liabilities

2288.

6 2718.9

3250.

9

Current

Liabilities 6956.88

10040.3

7 10968.21

Quick Assets 0.38 0.36 0.36 Quick Assets 0.19 0.19 0.20

Interpretation:

27



The quick ratio in of both the companies does not reveal good liquidity position

as it is below the standard of 1:1. This means that the liquid assets are not

sufficient to provide a cover to current liabilities. The quick ratio of maruti

Suzuki is hifhe as compared to tata motors.

PROFITABILITY RATIOS

28



The primary objective of a business is to earn profits. Profitability ratios are a

test of efficiency and a measurement of control.

1. Gross Profit Ratio

This ratio indicates the extent to which selling prices of goods per unit may decline

without resulting in losses on operations of a firm. It measures profitability of the

firm through the relationship between gross profit and sales. It reflects the

efficiency with which the firm produces its products.

The gross profit ratio should be adequate to cover the operating expenses of the

firm. Higher the ratio better is the profitability.

Gross profit margin or ratio = Gross profit X 100

Net sales

Maruti

suzuki

Mar

'07

Mar

'08

Mar

'09

TATA

Motors Mar '07 Mar '08 Mar '09

Gross Profit

2588.8

2

3130.8

4 2433.4 Gross Profit 3473.89 3511.15 2627.24

Net Sales

14806.

4

18066.

8

20729.

4 Net Sales

26664.2

5

28767.9

1 25660.67

Gross profit

ratio 17.48 17.33 11.74

Gross profit

ratio 13.03 12.21 10.24

Interpretation:

29



The gross profit ratio has declined for both the companies in the year 2009

compared to the previous year’s which shows that the profitability of the firms

has declined.

The gross profit declined but as compared to tata motors, maruti Suzuki has

higher gross profit rate.

2. Net Profit Ratio

30



It measures the relationship between net profit and sales of a firm. It indicates

management’s efficiency in manufacturing, administrating, and selling the

products.It also indicates the firm’s capacity to face adverse economic conditions such as

price competition, low demand etc.

Higher the ratio better is the profitability.

Net profit margin or ratio = Earning after tax X 100

Net Sales

Maruti

Suzuki

Mar

'07

Mar

'08

Mar

'09 TATA Motors Mar '07 Mar '08 Mar '09

Net Profit

1561.9

8

1739.7

3

1218.7

4 Net Profit 1913.46 2028.92 1001.26

Net Sales

14806.

4

18066.

8

20729.

4 Net Sales

26664.2

5

28767.9

1 25660.67

Net profit

ratio 10.55 9.63 5.88

Net profit

ratio 7.18 7.05 3.90

Interpretation:

The ratios show a steep decline over the 3 years which shows the weak

profitability position of both the companies. As gross profit net profit of maruti

Suzuki is also high compared to tata motors.

3. Operating Profit Ratio

31



The operating profit ratio establishes the relationship between the operating profit

and net sales of the firm and is used to measure the operating efficiency of the

firm.

Higher the ratio better is the operating efficiency.

Operating profit ratio = Operating profit X 100

Net sales

Maruti

Suzuki

Mar

'07

Mar

'08

Mar

'09

TATA


Operating

Profit 2256.1 2628.7 1976.6

Operating

Profit 3228.7 3028.02 1701.27

Net Sales

14806.

4

18066.

8

20729.

4 Net Sales

26664.2

5

28767.9

1 25660.67

Operating

profit ratio 15.24 14.55 9.54

Operating

profit ratio 12.11 10.53 6.63

Interpretation:The ratio has fallen down considerably in case of both the firms which show

that the operating efficiency of the firm is not satisfactory. Whereas compared

to tata motors maruti Suzuki has high operating profit.

4. Networth Ratio or Return on investment Ratio(ROI):

32



ROI is the relationship between net profits and proprietors funds. It is used to

measure the overall efficiency of a firm. It indicates the extent to which the

earnings of a firm can be maximized.As the ratio reveals how well the resources of a firm are being used, higher the

ratio, better are the results.

ROI= Net Profit after tax X 100

Shareholder funds

Maruti

Suzuki Mar '07 Mar '08 Mar '09

TATA


Net PAT 1562 1730.8 1218.7 Net PAT 1913.46 2028.92 1001.26

Shareholders

funds 6853.9 8415.4 9344.9

Shareholder

s funds 6869.75 7839.5 12394.27

Networth

ratio

22.78994

4

20.56705

6

13.04133

8

Networth

ratio

27.85341

5

25.88073

2 8.0784104

Interpretation:

The efficiency of the firm has deteriorated considerably in the year 2009 as the

ROI has come down from the year 2007.

Due to recession return on investment low down maruti suzuki’s return was high as

compared to tata motors.

5. Return on Capital Employed Ratio(ROCE):

33



ROCE establishes the relationship between profits and capital employed. It is the

primary ratio to measure the overall profitability and efficiency of a business. It

represents the long-term funds supplied by creditors and owners of the firm.

A higher percentage of ROCE will satisfy the owners that their money is profitably

used.

Return on capital employed = Profits before Tax X 100

Capital employed

Maruti Suzuki

Mar

'07

Mar

'08

Mar

'09 TATA Motors

Mar

'07

Mar

'08 Mar '09

Profit Before

Tax

2285.

2

2494.

9

1710.

8

Profit Before

Tax

2573.8

3

2576.4

7 1013.76

Networth

6853.

9

8415.

4

9344.

9 Networth

6869.7

5 7839.5 12394.27

ROCE 33.34 29.65 18.31 ROCE 37.47 32.87 8.18

Interpretation:

A very low percentage in the year 2009 as compared to 2007 indicates that there is

a decline in the profitability position of the both the firms.

In 2007 and 2008 tata motors ROCE was high but in 2009it wasow as compared to

maruti Suzuki.

LEVERAGE or CAPITAL STRUCTURE RATIOS

34



Financing firm’s assets is a very crucial problem in every business and as general

rule there should be a proper mix of debt and equity capital in financing the firm’s

assets. Leverage ratios are calculated to test the long term financial position of a

firm. These ratios are based on the relationship between borrowed funds and

owner’s capital.

1. Debt-Equity Ratio:

Debt-equity ratio measures the relative claims of outsiders and the owners against

the firm’s assets. It indicates the extent to which debt financing has been used in a business. The purpose is to get an idea of the cushion available to outsiders on the

liquidation of the firm.

A ratio of 1:1 is considered to be satisfactory. A low ratio is considered as

favorable.

Debt equity ratio = Outsider Funds (Total Debts)

Shareholder Funds or Equity

Maruti Suzuki

Mar

'07

Mar

'08

Mar

'09 TATA Motors

Mar

'07

Mar

'08 Mar '09

Total Debt 630.8 900.2 698.9 Total Debt

4009.1

4

6280.5

2 13165.56

Networth

6853.

9

8415.

4

9344.

9 Networth

6869.7

5 7839.5 12394.27

Debt to

Equity Ratio 0.09 0.11 0.07

Debt to

Equity Ratio 0.58 0.80 1.06

35



Interpretation:

The debt-equity ratio in all the years is favourable as it is below the standard of

1:1.This shows that the long term solvency position of the firm is satisfactory.

Debt of tata motors is higher than maruti Suzuki.

2. Fixed Assets to Networth Ratio:

36



The ratio of fixed assets to Networth indicates the extent to which shareholder’s

funds are sunk into the fixed assets.

If the ratio is more than 100%, it implies that owner’s funds are not sufficient to

finance fixed assets. 60 to 65 per cent is considered to be satisfactory ratio.

Fixed assets to net worth ratio = Fixed Assets X 100

Net Worth

Maruti Suzuki

Mar

'07

Mar

'08

Mar

'09

TATA

Motors

Mar

'07

Mar

'08 Mar '09

Fixed assets

2659.

7

3296.

5

4070.

8

Net Block/

fixed asset

3881.2

6

5387.3

1 7645.27

Networth

6853.

9

8415.

4

9344.

9 Networth

6869.7

5 7839.5 12394.27

Fixed assets

to net worth

ratio 38.81 39.17 43.56

Fixed assets

to net worth

ratio 56.50 68.72 61.68

Interpretations:

In 2009, the ratio has increased which shows that there are sufficient funds for

financing fixed assets as well as working capital for Maruti. Similarly in case of

Tata, the ratio has been below 100% which indicates there are sufficient funds to

finance the fixed assets.

3. Proprietary Ratio:

37



This ratio establishes the relationship between shareholder’s funds to total assets

and is used to determine the long-term solvency of a firm.

Higher the ratio or the share of the shareholder’s in the capital of the company

better is the long-term solvency position of the company.

Proprietary ratio = Networth

Total assets

Maruti

Suzuki

Mar

'07

Mar

'08

Mar

'09

TATA


Networth

6853.

9

8415.

4 9344.9 Networth 6869.75 7839.5 12394.27

Total Assets

7484.

7

9315.

6

10043.

8 Total Assets

10878.8

9

14120.0

2 25559.83

Proprietary

ratio 91.57 90.34 93.04

Proprietary

ratio 63.15 55.52 48.49

Interpretations:

In case of Maruti the shareholders funds being 90% of total assets in 2008 has gone

up to 93% of total assets in 2009, it proves that the long-term solvency position of

the firm is satisfactory. Whereas in case of Tata, the ratio has fallen down which

indicates that the long-term solvency position of the firm is deteriorating.

38



RESULTS / FINDINGS

• The Indian automotive industry has provided direct employment and

contributed to the GDP.• The short-term solvency position of the companies is not sound and is

deteriorating at a constant rate.

• The long-term position of the companies is quite satisfactory. The firms are

making losses in the core activities of the business. So they should try to

increase the sales.

• The funds of shareholders are employed efficiently.

• The efforts to maximize earnings seem to be unproductive. The overall

efficiency of the companies has deteriorated considerably.

• The firms are witnessing sharp decline in profitability and are also facing

severe problem of non-availability of working capital.

39



CONCLUSION

The face of the Indian automobile market has changed tremendously since the turn

of the millennium and will change even further since Nano.

De-licensing in 1991 has put the Indian

automobile industry on a new growth track,

attracting foreign auto giants to set up their

production facilities in the country to take advantage of various benefits it offers.

The industry has progressively witnessed the formation of global alliances seeking

the benefits of scale, market access and technology which is strengthening the

evolution of the Industry in our country.

IT plays an important role in reducing the cost of developing a vehicle, and India is

emerging as a research and development (R&D) hub for the auto industry.

Amid the economic crisis, the Indian auto industry managed to stay positive. Even

as global auto majors went into reverse gear in 2009, the Indian industry largely

bucked the trend, launching new models for the domestic market and registering

significant growth in exports.

With the Nano, Tata has challenged the global auto industry and created an

absolutely new segment with this car . Low cost, design innovation and economies

of scale are now becoming the hallmark of the Indian automobile industry.

40

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SUGGESTIONS

• The firms need to improve their short-term financial position.

• The borrowed debt should be invested properly so as to maximize the

earning capacity.

• The firms have sufficient funds to finance the fixed assets. They can use

these funds to finance working capital also so as to improve the short-term

financial position.

• Instead on depending on the debt financing, the company should focus on

internal equities.

• Like Nano, the firms shall try to introduce such products at lower price

ranges which will be a good sign of growing competition.

• A healthy competition is prevailing in the automobile industry. Maruti and

Tata are facing tough competition from others companies like Toyota,

Hindustan Motors, and Mahindra etc. The firms should try to make

competitive strategies to increase the sales and profits.

• Modern-age design tools should be used by automobile manufacturers to

develop better products in a shorter timeframe, as well as further reduce

overall costs.

• The Indian auto component industry which is the supply chain for the

automobile vehicle manufactures in India needs to be supported especially

the Small and Medium Enterprises, (SME).

41



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